The prison population rose sharply last week. The Home Office expects it to hit an all-time high next week, topping the 77,800 record. It predicts that prisons will burst their seams by autumn, overflowing into emergency police cells. There are some 500 spare places in open prisons, but risk-aversion in the face of a media storm leaves them empty.

Why this relentless rise? Crime is in long-term decline, down 43% since 1995, according to the British Crime Survey (BCS) - falling all across Europe, though few believe it. (The BCS doesn't include under-16s, but the Youth Justice Board says there is no rise there either.)

One good reason for the rise is improved crime detection, the best in five years. Another good reason is that courts have 40% fewer "ineffective" trials abandoned through bungling. But the single overwhelming reason why jails are bursting is longer sentences given for more crimes. An unquenchable thirst for punishment has seen the numbers given prison sentences rise by 53% in the same decade that crime has fallen.

Of all the obnoxious qualities of the British press - its cynicism, its relentless "nothing works" projection of a society in perpetual decline - what the media does to criminal justice is the most measurably pernicious of all. But Labour has fed the frenzy and tried, unsuccessfully, to ride the tiger. There is an awful justice in Labour coming to grief over the Home Office, where its policies have most cynically ignored what works. Ever since "tough on crime", Labour has never dared to talk down punishment fever or tell voters that we already have the longest sentences in Europe.

The result? More criminals reoffend. The Prison Reform Trust points to official figures showing how prison overcrowding raises the reoffending rate. In 1995 56% reoffended within two years of release - now it is 67% (53% of those given community sentences reoffend).

Prison governors despair at the churn of inmates, forever moved on far from home, disrupting treatment, education and training. Most prisons now miss their targets for "purposeful activity". "What's the use of sending us people for a few months, just long enough to lose their home, family and job?" said one governor of a crowded inner-city prison. "By the time they've waited to get on a course here, they are moved on or out."

Knife crime is the panic of the day. Recently there have been some horrible murders, including those of a brave student defending a woman on a train, a father of three stabbed after spending a day volunteering, and a popular 15-year-old knifed outside his school gates - all heartbreaking deaths.

They were enough to send the press phoning round police stations for more hair-raising knife tales: there were plenty to be found. It was, they said, "a wave", "a spate", "an epidemic". Reporters hung out on the streets with boys eager to brag about the "shanks" in their pockets. This 15-year-old claims he's called "Killer" and shows the Mirror his fancy-handled knife with pride. That one boasts of the people he's shanked to get respect. Indeed, police have seized 50% more knives: the symbolic knife amnesty lasts another week.

But horrible though these crimes are, there is no upsurge. In 1995 there were 243 murders with sharp instruments; 10 years later there were slightly fewer, at 236 last year. Over the decade the average weekly number of knife murders has been four and a half - and recently, during this panic, there have been no more than four knife murders a week. Anecdotes stick horribly in the memory, but the figures tell another story.

Knowing that knifings are not "out of control" but probably in a steady state would calm public nerves. But instead of explaining that, the government promises to lock everyone up. John Reid is considering amending the violent crime reduction bill to introduce a mandatory five-year sentence for carrying a knife. Add to that the insane Home Office plan to give a 14-year sentence to anyone caught with enough cannabis for 10 joints, and there will be hardly a young man left outside jail. Add another increase from next November's "custody plus" sentence, which will give magistrates the option to give petty criminals a short prison taster before a community sentence. (Due to an oversight, no one on a custody-plus sentence can be forced into drug or alcohol treatment programmes.)

Short jail sentences are worse than useless, as the public accounts committee said this week, led by the rightwing Tory Edward Leigh; the committee has called for alternatives to jail and for the 5,000 inmates with serious mental illnesses to be moved to the NHS, where they belong. But the parties respond to crime panic by fanning the flames. The Tories clamour for more prisons to be built. Now the Lib Dems are getting tough: "Sir Menzies Campbell has made the fight against crime a priority for his leadership," they announce. Labour responds with its latest pathetic yah-boo email: "Lib Dems soft on crime, soft on thugs". What hope in this climate?

Tony Blair held a crime seminar in Downing Street this week; criminologists I spoke to afterwards had come away tearing their hair out in distress. He seemed to mix together low-level antisocial behaviour with serious crime, terror and other international crime into a single pot of alarm - questioning whether human rights, laws of evidence and civil liberties tipped things too much against the rights of victims.

The one victims' right that matters most is cutting the risk of crime. So what really works? Treatments in jail do some good, but it's mostly too late: finding a family and a job or just growing older make most prisoners eventually give up crime. A Reading jail wing where Transco trains gas fitters and guarantees them all a job when they come out works brilliantly. Why not more of that?

How tragically revealing that half of all prisoners are completely illiterate and another 20% have a reading age under eight. The Shannon Trust gets prisoners to teach each other to read; it costs just £70 per pupil over about six months, and gives the mentors a new sense of self-worth. But many prisons are too overcrowded to be able to do it.

However, tucked away in the Cabinet Office's own strategic audit is the kind of evidence the prime minister should be poring over. Unpublished Home Office research assessing the cost-effectiveness of ways to reduce crime has produced astonishing results. Estimating crimes reduced per £1,000 spent, they find (depressingly) that current drug treatment cuts only 1.3 crimes. (There are very few residential drug-treatment places, when addicts need Priory-type intensive help.) Hot-spot policing cuts 1.9 crimes. Reoffending-reduction schemes in prison cut 2.3 crimes. But parenting programmes cut 11 crimes. And Youth Inclusion and Support Panels cut 15 crimes per £1,000 spent. In these a panel of all the local services takes eight- to 13-year-olds at highest risk and gives them intensive support before it's too late - treating 36,000 of the most precarious children, with these good results. But has anyone heard of it? Why doesn't Labour talk about its most successful programmes? Prison numbers will go on rising until politicians stop running scared of the Daily Mail and start talking about what really works.